Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/73862
Authors: 
Sebald, Alexander
Walzl, Markus
Year of Publication: 
2012
Series/Report no.: 
Working Papers in Economics and Statistics 2012-16
Abstract: 
As we have demonstrated in a recent laboratory experiment [see Sebald and Walzl (2012)], individuals tend to sanction others who subjectively evaluate their performance whenever this assessment falls short of the individual's self-evaluation even if their earnings are unaffected by the assessment. Hence, performance assessments which fall short of the agents' self-evaluation can be interpreted as an unkind act that triggers a negatively reciprocal response not only if the assessment determines an agent's earnings but also if it lacks monetary consequences. We propose a principal-agent model that accommodates this kind of payoff independent reciprocity and identify conditions for a positive welfare effect of increasing costs of conflict or increasing psychological sensitivity, and a negative welfare effect of a more informative information technology. As a consequence, principals may choose imperfect information technologies in equilibrium even if the signal quality is costless.
Subjects: 
Contracts
Subjective Evaluations
Self-Esteem
Ego-Threats
Reciprocity
JEL: 
D01
D02
D82
D86
J41
Document Type: 
Working Paper

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